William Forsyth Sharpe, an American economist and recipient of the Nobel Memorial Prize for Economic Sciences, is renowned for his contributions to the field of investment analysis. He is credited with developing the Capital Asset Pricing Model (CAPM) and introducing the Sharpe Ratio, a measure for evaluating investment performance. Sharpe also devised various methods for options evaluation, asset allocation optimization, and assessing investment returns. His groundbreaking work revolutionized the way investors approached portfolio management, making it accessible to all, regardless of the composition of their portfolios. One of his key contributions was the introduction of the “beta” value as a measure of unmitigated risk in a portfolio, allowing investors to gauge potential returns based on market fluctuations. Today, Sharpe’s models and theories remain fundamental tools for evaluating the performance and risk of investment portfolios.
Quick Facts
- Also Known As: William Forsyth Sharpe
- Age: 89 Years, 89 Year Old Males
- Family:
- Spouse/Ex-: Kathryn
- Children: Deborah, Jonathan
- Economists
- American Men
- City: Boston
- U.S. State: Massachusetts
- Awards: Nobel Memorial Prize in Economic Sciences (1990)
Childhood & Early Life
William Sharpe was born in Boston, Massachusetts, USA on June 16, 1934. He attended Riverside Polytechnic High School and graduated in 1951. Initially, he enrolled at the University of California at Berkeley to study medicine, but later switched to Business Administration at the University of California at Los Angeles (UCLA). He earned his B.A. in economics from UCLA in 1955 and his M.A. degree in 1956. During this time, he joined the Army briefly before starting his research at the RAND Corporation and working on his PhD thesis with Harry Markowitz. He earned his PhD from UCLA in 1961 while still working at RAND Corporation.
Career
In 1961, William Sharpe moved to Seattle and became a professor of finance at the University of Washington’s School of Business. It was during his time at this university that he began his research on asset pricing and developed the Capital Asset Pricing Model (CAPM). He remained at the University of Washington until 1968, with a one-year break to work for the Rand Corporation. He then moved to the University of California at Irvine for a couple of years before joining Stanford University’s Graduate School of Business in 1970. At Stanford, he continued his research and teaching, and in 1973, he was named the Timken Professor of Finance. He also became a consultant for Merrill Lynch, Pierce, Fenner and Smith, and Wells Fargo, where he applied his financial theories to practical solutions. In 1980, he was elected the president of the American Finance Association.
From 1975 to 1983, William Sharpe served as a trustee for the College Retirement Equities Fund and Research Foundation of the Institute of Chartered Financial Analysts. He also held committee positions in the Institute of Quantitative Research in Finance and the Council on Education and Research of the Institute of Chartered Financial Analysts. He served as a strategic advisor for Nikko Securities’ Institute of Investment Technology and the Union Bank of Switzerland’s Portfolio Management department. In 1986, he co-founded the consulting firm Sharpe-Russell Research with Frank Russell, providing asset allocation consultations to foundations and pension funds companies. He retired from teaching in 1989 but remained a Timken Professor Emeritus of Finance at Stanford University. After retirement, he focused on his consultation firm, William Sharpe Associates, and founded Financial Engines (FNGN), which implemented his financial theories into real-life scenarios using modern technologies. He also became the president of the American Finance Association and a trustee for Economists for Peace and Security.
Major Works
William Sharpe published several influential papers, including “A Simplified Model for Portfolio Analysis” in 1963 and “Capital Asset Prices – A Theory of Market Equilibrium Under Conditions of Risk” in 1964. He also authored the book “Portfolio Theory and Capital Markets” in 1970 and 2000, “Asset Allocation Tools” in 1987, and “Investments” and “Fundamentals of Investments” in collaboration with Jeffrey Bailey and Gordon J. Alexander in 1999 and 2000, respectively. In 2012, “William F Sharpe: Selected Works” was published.
Awards & Achievements
William Sharpe has received numerous honors and awards throughout his career. He received honorary doctorate degrees from DePaul University, the University of Alicante in Spain, and Vienna University. He was also awarded the UCLA Medal, the highest honor given by UCLA. In 1990, he was awarded the Nobel Prize in Economics.
Personal Life & Legacy
In 1986, William Sharpe married Kathryn, a renowned painter. They have two children, Deborah and Jonathan. In his personal life, Sharpe enjoys sailing, football, basketball, and the opera.